I sympathise with Theresa May. She has a very difficult decision to make for the country.

The two options are:

Option 1: The Mass Lemming option

We are hold hands – that is all 65.64 million of us, minus two, and jump over a very high cliff into economic contraction/uncertainty and a return to ghastly sectarian murder in Northern Ireland. But the good news is that the press will love it and John Redwood and Jacob Rees-Mogg (the minus two) will be at the bottom of the cliff to catch us.

Option 2: The option for those who are scared of heights

Honour the EU referendum 100%, leave the EU, stay in the single market and customs union, keep a stable and thriving economy, have an emergency brake on immigration and keep peace in Northern Ireland.

It’s a really tricky one, isn’t it?

* Paul Walter is a Liberal Democrat activist. He is one of the Liberal Democrat Voice team. He blogs at Liberal Burblings.

27 Comments

She has a third option, which she would take if she had the interests of the Country at heart. It is time to stop this nonsense. It was not a democratic decision. A pack of lies from snake oil salesmen, possibly illegally funded, prompted by Putin and a handful of newspapers who do not have the country at heart. The outcomes do not look good, a poorer country, less word influence, possible restarting the Irish problems and/or breaking up the UK, labour shortages in key areas – the list goes on. The time is approaching for this party to take the Brexiteers on and make it clear enough is enough.

The jumping off of the cliff like lemmings occurred in 2010 when the Party went into Coalition with a sweet talking ferocious crocodile in the Rose Garden. The better fed crocodile is still around causing mayhem to all and sundry, but there’s hardly anything left of its prey.

And if May takes option 2, we still have the disadvantage of having to pay into the EU as Norway does with no control over their future regulations. David Beckett’s third option of withdrawing Article 50 and staying in the EU is the only sensible one.

Another analogy might be that the euro is such a bad idea, as agreed by nearly all economists, that we’ll be better off leaving the sinking EU ship than staying aboard. The Economist likens the effect of the eurozone exploding to Chernobyl.

“the Titanic is a misleading analogy. Once the Titanic sank beneath the icy waves, it effectively ceased to exist. If the euro blows up, the consequences will be horrible and long-lasting.”

We should remember that the late Ian Paisley MP, MEP said that the EU is a “Catholic conspiracy”. This ignored the Greek Orthodox (Orthodox churches are founded within a state. Romania and Bulgaria have also been EU member states sine 2007).
We should note that Arlene Foster is not First Minister in Northern Ireland. The DUP have no agreement with Sinn Fein. The Northern Ireland Assembly has not met since the elections of January 2017. It follows that the DUP are not entitled to imply that they speak for Northern Ireland. Other local voices have a variety of different views.
In the House of Commons in London the non-violent Catholic nationalists of the SDLP used to say that the birthrate in their community was high and rising. We were told by our then Northern Ireland spokesman, now a peer, that Ian Paisley said loudly that, not only were the figures all wrong, but that it was “an insult to Protestant manhood.” There was widespread laughter. The Commons moved on without deciding the issue.

If the Unionists had any sense they would be doing a deal with the Nationalists before the next border poll goes in favour of unification. If they wait until then they will have to accept whatever they are given.

@David Becket “She has a third option, which she would take if she had the interests of the Country at heart.”

When May was appointed David Cameron’s successor, many thought the adults were back in charge and that the three Brexit monkeys would be put in their place and the world would revert to normal. It is clear May isn’t of that calibre, she is just an administrator who is way out of her depth, with her colleagues being happy for her to take the fall.

Tis sad watching the brave Brexiteers waiting for the EU too sink. Every months they have a new reason why, the Dutch will vote for Wilders (well some did but not enough), Le Pen will win (she didn’t), ADF will sweep to victory in Germany (they didn’t) and now back to the old chestnut, the Euro will fail. Take heart my brave Brexiteers one day you will be right, but I suspect brave Britannia will have sunk beneath the waves by then.

@Peter Martin – If the Euro is such a “bad idea”, how come it is Sterling that has depreciated by almost 20% against the Euro, not the other way around, since the launch of the Euro? Are you seriously trying to suggest that the financial markets have been mispricing the Sterling:Euro exchange rate for the better part of twenty years?

Analysts at Deutsche Bank warned that the Bank of England may not be able to raise interest rates “at all” if Britain’s recovery slows.

It believes the pound could fall as low as $1.27 next year and $1.15 in 2017 from about $1.485 today if the US Federal Reserve continues to tighten monetary policy and the Bank of England leaves interest rates on hold.

“We have various different ways of looking at currency valuations and what we find is that sterling is the most expensive currency out there at the moment – even including the dollar,” said Oliver Harvey, foreign exchange strategist at Deutsche Bank.

The slump in sterling is a blessing in disguise after years of overvaluation and helps to break the corrosive stranglehold of the financial elites over the British economy, according to a former bail-out chief for the International Monetary Fund.
[…]

“The UK economy is rebalancing amazingly well. It is a stunning achievement that a once-in-fifty-year event should have gone so smoothly,” he told the Telegraph.
[…]
“Britain was borrowing 5pc to 6pc of GDP a year to buy imports and live beyond its means. The strong pound was great if you wanted to buy a Mercedes Benz of take a holiday in Spain, but the prosperity was an illusion, borrowed from the future,” he said.
[…]

“History is going to judge that Brexit at last broke the political-economy lock of a British elite wedded to banking interests, even if it happened completely by accident,” he said.
[…]

Lord King, the former Governor of the Bank of England, echoed the comments on sterling, saying the sell-off was largely welcome.

But Jeff if the £ is the most over valued currency the Euro must be under valued against it. Ergo in that case people have an unrealistic negative concept of the strength of the Euro and there can only be an up side for it. Rather blows Peter’s (and many other Brexiteers) hope that the Euro will fail out of the water doesn’t it.

The Euro is overvalued for some countries and undervalued for others – that’s the problem. Without fiscal transfers between countries the arrangement is doomed to fail. In recent years, the cracks have been papered over with Quantitavive Easing. Even Mario Draghi, the ECB President, knows it’s unsustainable…

The euro is a bad idea because it unrealistic to expect 19 countries which are at different stages of their economic development to share the same currency. Currency movements are an essential mechanism in enabling a country’s economy to adjust to changing world conditions. The Canadian dollar is down about 30% from its peak of a few years ago. So does that mean Canadians would be better off using the US dollar or pegging their currency to it? They obviously don’t think so.

Jeff explains it well with his last comment. The euro system is too rigid. You shouldn’t mistake rigidity for strength.

@Jeff and Frankie,

Whether on not the pound is overvalued is a difficult question to answer. If the pound is high we can afford more imports. So we end up with a current account deficit. This is balanced by a surplus in the capital account. This usually means that someone from overseas is buying things like UK gilts which pushes up the pound and also creates debt. That’s not really any more of a problem than you and I creating debt by buying premium bonds but if we think it is a problem we can get ourselves into a mess.

So we need to decide on what we want. We have to choose 2 out of the following 3. 1) A high pound. 2) Low Govt and Private Debt. 3) A healthy economy. We can’t have all three.

I’m not hoping for the euro to fail. It nearly did around 2012 but the PTB in the EZ kept it going with their QE program as Jeff says and that does explain the recent better growth we’ve seen. It was only a temporary fix though.

In any case, the Germans hate the idea and are trying to wind it down. As Jeff says there needs to be a system of fiscal transfers to make it work. They aren’t too keen on that idea either!

Look, I could be quite wrong and Germany and the other wealthier countries may soon decide that they do need to make the EU into a true fiscal transfer union. You might want to Google that term. I’ll be the first to give them three cheers for that!

Everyone has been doing QE. The EU less than most (the Germans never quite bought into it) and the winner by a clear margin is Japan

Bank of Japan Tapers (Quietly), QE Party Over
No flashy announcement, to avoid alarming the markets.

After years of blistering asset purchases, the Bank of Japan disclosed today that it held a total of ¥521.6 trillion in assets as of November 30, including Japanese Government Bonds (JGBs), gold, corporate bonds, Japanese REITs, equity ETFs, loans, etc. That is quite a pile, so to speak. It amounts to about 96% of Japan’s GDP.

By this measure, the BOJ’s balance sheet dwarfs the Fed’s balance sheet, which amounts to 23% of US GDP. When it comes to QE, no one can hold a candle to Japan. Its holdings of JGBs alone rose to ¥443.6 trillion. Its balance sheet looks like a typical post-Financial-Crisis central-bank balance sheet on steroids (chart in trillion yen):

Another day in Brexitland. the one thing that really puzzles me is why most Brexiteers seem to be puzzled when they encounter reality. I know they were warned, but even with the warnings every time they meet hard reality they stand there muttering “Well I didn’t expect that”, before shuffling off muttering “O well, never mind carry on”. You know the next day they will meet the same reality and will mutter “Well, well I am surprised I thought Tinks would have sorted it by now. Perhaps she is waiting for the unicorns to turn up to drag it away. That will be it, we are just waiting for the Unicorns” and off they toddle. The day after as they run across the same fact they probably blame the no removal of the fact on a shortage of Orcs “Dammed lazy Orcs never on time too help the unicorns”. Still as long as they can dress up in fairy finery and sing “We believe we can fly”, all is well.

There is more support, according to your link, for the proposition “‘In the EU, richer countries should financially support poorer countries.” than I would have anticipated. Even in Eurosceptic UK only 28% disagree with that. But just how much “financial support” isn’t specified in the question. A couple of billion euros is neither here nor there in terms of what is required. Neither is it specified if the support should be in the form of transfers or loans.

A more telling question is “The EU should eventually become a United States of Europe.” This is what is needed to make the euro work. There’s also slightly more support for that than I would have expected with majorities in Spain, Italy, and Belgium. But there’s only 19% support for the idea in Germany which means it’s a non-starter politically.

The purpose of QE is to reduce longer term interest rates. If they are too high for the Govts/Central Banks liking the central bank steps into the market to buy up bonds. The extra demand forces up their price, reducing their yield and therefore interest rates too. So, once interest rates are low enough there is arguably no need to carry on. Although they could rise again if the Govt/Central Bank stopped QE.

So QE has had an effect of lowering interest rates everywhere in has been used. This has removed a large strain on euro using countries. This is, I would argue, largely responsible for recent improved data from the EZ. I would also argue it needs to continue. Rates will shoot up again as soon as it is stopped. There’s no risk lending pounds to the UK govt but there is a risk lending euros to euro using countries. So the market will want a higher rate of interest.

This is actually an argument used by ordoliberal/neoliberals against QE. They think that the government is distorting the market for debt by artificially reducing interest rates. I expect those in the EU who are saying that may get the upper hand soon and QE will be wound back. They are partly right. Low interest rates are only a temporary fix. But they are completely wrong in thinking QE can be removed without replacing low interest rates by fiscal transfers.

I have posted in a long time as haven’t felt the need to, with old arguments rehashed. This initial article seems to miss the whole point of why people voted to leave.

If we remain inside the single market and customs union, we have not left the European Union. It is as simple as that.

We would have to adhere to EU rules and regulations. ECJ we have supremacy over UK courts and we would not have regained the ability of full self-determination. We would have left the name ‘European Union’ but would still be restricted as if a member.

Do you think those who voted to leave would be happy with that? No and they would make that feeling known in an election or 2nd referendum voting even more strongly to ‘fully’ leave.

Exiting the EU remains one of those things that could be done relatively straight forward or made horrendously difficult. It simply depends on how difficult advocates on both sides wish to make it.

As someone who voted leave I say to the originator of the article you are plain wrong; you cannot leave the EU and remain in the single market and customs union and honour the referendum result.

But ethicsgardiant as the Cabinet has not yet made it’s mind up about what shape Brexit will take it is a little premature to say what Brexit will be. i know tis sad for the Brexiteers to realise that you’ve voted for a pig in the poke option. Still cheer up by the end of the year you might know what you have voted for. I rather doubt it will be your sort of Brexit, but take heart it’s unlikely to be the sort of Brexit most of you voted for, so at least you will have company.

I suspect it comes as a shock too see how ill prepared the Brexiteers are, but if it’s any consolation they have even shocked me. Why my tales of Tinkerbell have more grounding in reality than the guff they’ve come out with lately.

‘Truth’s stranger than fiction, because fiction has to be possible and truth doesn’t’?”

I think what I voted for chimes with most of those who voted to leave. Which would be something close to what we entered into when we joined the common market (minus the supremacy of EU law which was brushed aside at the time, Heath declaring no loss of sovereignty)

Which is a free trade agreement between nation states, with a regulatory framework to arbitrate on matters of disagreement. Not the fully fledged governmental machinations of a proto-nation state. No judicial oversight from the EU, Full ability to control boarders (I am all for immigration substantial immigration but it should be meritocratic and with the ability to control flow.) and full ability to make interdependent trade deals around the world.

Through lots of stresses, strains, up and downs, I think we will get there. Because underlying everything is nations self interests. It is in everyone’s interests to have a smooth free-trade agreement.

I think this is a logical view point.

Difficulties are being caused because the underlying viewpoint of the Westminster establishment is to keep the status quo and remain in the EU. I would welcome a 2nd referendum as I would certainly still vote to leave and I am pretty sure the country would once more vote to leave. probably with a more decisive vote for leave. But that is a hypothetical.

The Brexiteers argument that devaluation of sterling was a blessing in disguise can be taken further. Surely Britain has been spoilt by far too much material wealth in the past, a bit of humbling and poverty will be good for our souls. And why do we want to be an important or influential country? Far better to be modest and unassuming.

Like the robbers who claim their victims will be better off because money is the root of all evil, like those who claim that food shortages in Africa are good because they combat obesity, there is no limit to human hypocrisy, and we will be seeing more of it as Brexit unfolds.

The term “devaluation” was used in the days of fixed exchange rates which ended in the early 70’s. Now the pound floats. So do most other currencies like the Yen, the Canadian dollar and Australian dollar etc.

The latter are down by about 30% from few years ago. There’s been no official ‘devaluation’ from either government. Is it a bad thing that they are down? The Australian and Canadian government seem perfectly relaxed about the movements.

The move to fixed exchange rates, generally, in the EU and the single currency in the eurozone is economically regressive. They remove the ability of any economy to adjust to changing world conditions.

Whether the fall in sterling is a “blessing in disguise” really depends on the question being asked. If we want less overall debt then we need to move to balancing our trade. Someone in the UK, either Govt or you and I, has to borrow to fund the trade deficit. A lower currency has to be part of that package.

If we aren’t so worried about debt and are happy to make use of the capital inflows into the country, then they aren’t such a good thing as we have to pay more for our imports.

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